Golden Bay Realty Pte. Ltd v Orchard Twelve Investments Pte. Ltd

• Jurisdiction: Singapore
• Judgment Date: 23 March 1989
• Date: 23 March 1989
• Docket Number: Civil Appeal No 38 of 1986
• Court: Court of Appeal (Singapore)

Golden Bay Realty Pte Ltd

Plaintiff

and

Orchard Twelve Investments Pte Ltd

Defendant

[1989] SGCA 5

T S Sinnathuray J

,

F A Chua J

and

Chao Hick Tin JC

Civil Appeal No 38 of 1986

Court of Appeal

Contract–Remedies–Liquidated damages or penalty–Whether common law rules on penalties applicable to contracts in prescribed statutory form–Sections 5 (1), 5 (2), 7A (2), 9 (3) and 10 Sale of Commercial Properties Act (Cap 281, 1985 Rev Ed)–Sale of Commercial Properties (Amendment) Act 1980 (Act 38 of 1980)–Rules 6 and 7 Sale of Commercial Properties Rules 1979 (GN No S 158/1979)–Damages–Liquidated damages or penalty–Whether stipulated damages in contract is genuine pre-estimate of damages–Land–Sale of land–Conditions of sale–Failure to give notice to complete–Liquidated damages clause–Whether vendor can rely onforce majeure clause when he had underprovided for time to give notice to complete sale–Whether force majeure clause wide enough to excuse vendor for delays of its consultants

The appellant (“the vendor”) entered into an agreement to sell certain premises in a building development known as “Orchard Towers” to the respondent (“the purchaser”). The agreement was in a form prescribed under the Sale of Commercial Properties Rules 1979 (GN No S 158/1979) (as amended in 1980). The agreement required the vendor to give the purchaser notice to complete the sale by 31 December 1981. It further required completion to take place 14 days after the notice. Clause 14 (2) of the agreement provided for liquidated damages to be paid “if the vendor shall fail to give the said notice to complete on the date fixed for completion”. Clause 15 is a force majeure clause allowing the vendor to be excused for any delay “by reason of any strike, riot, civil commotion, earthquake, flood or natural disaster or any other cause or causes over which the vendor has no control”.

The vendor argued in the High Court that: (a) it did not fail to give the requisite notice; (b) cl 14 (2) was illogical and rendered the whole provision relating to completion uncertain and ambiguous and was thus of no effect; and (c) cl 14 (2) was a penalty clause and should not be enforced. Finally, the vendor argued that the delay in completing the sale was due to a “cause or causes over which [it] had no control”. The trial judge found in favour of the purchaser, and the vendor appealed.

Two issues arose in this appeal. First, whether the liquidated damages clause in the agreement was valid and enforceable; and second, whether the vendor could rely on the force majeure clause in the circumstances and thus be excused from paying liquidated damages for the delay in completing the transaction.

Held, dismissing the appeal:

(1) On the facts, the vendor did not give the requisite notice to complete the sale by 31 December 1981: at [7].

(2) While cl 14 (2) could have been better drafted, the meaning was clear. The expression “the date fixed for completion” must mean the date fixed for service of notice to complete. The clause was thus not illogical. Such a construction did not amount to re-writing the clause. It was merely giving the clause the meaning which was manifest on the face of it: at [11].

(3) The prescribed damages could not be considered to be an extravagant or unconscionable amount. The extent of the loss which may be suffered by the purchaser may vary. Until the title was vested in the purchaser, the purchaser's interest was merely an equitable one. As a result of the delay, the caveat lodged against the property may expire. If, due to the lapse by the purchaser to renew the caveat, the property was dealt with and the new purchaser lodged a caveat, the loss to the first purchaser could exceed the prescribed damages. The fact that it was difficult to quantify the loss was just the situation when it was probable that pre-estimated damage was the true bargain between the parties. Applying the principles governing liquidated damages, the clause was found to be a liquidated damages provision and not a penalty provision: at [18].

(4) The agreement between the parties was in a prescribed form and they had no discretion to amend the form of agreement except with the approval of the Controller of Housing. Where the parties were compelled by law to enter into the contract in the form prescribed, the principles governing liquidated damages do not apply. Accordingly, cl 14 (2) could not be struck out on the ground that it was a penalty provision: at [22] and [23].

(5) There were three main causes for the delay; namely the vendor's consultants were slow in discharging their duties, the vendor did not take active steps to meet the deadline and there was an element of under-provision when the vendor specified 31 December 1981 as the date it would give notice to complete. The vendor had not shown that the delay was due to a cause or causes beyond its control: at [30] and [35].

Dunlop Pneumatic Tyre Company Limited v New Garage and Motor Company Limited [1915] AC 79 (folld)

Lee Kay Guan v Phoenix Heights Estate (Pte) Ltd [1977-1978] SLR (R) 614; [1978-1979] SLR 102 (folld)

Loates v Maple (1903) 88 LT 288 (refd)

Loh Wai Lian v SEA Housing Corporation Sdn Bhd [1987] 2 MLJ 1 (folld)

Phoenix Heights Estate (Pte) Ltd v Lee Kay Guan [1981-1982] SLR (R) 484; [1982-1983] SLR 20 (folld)

Planning Act (Cap 232,1985Rev Ed)s 9 (3)

Sale of Commercial Properties Act (Cap 281, 1985Rev Ed)ss 5 (1), 5 (2), 7A (2), 9 (3) and 10 (consd); s 9

Sale of Commercial Properties (Amendment) Act1980 (Act 38 of 1980)

Sale of Commercial Properties Rules1979 (GN No S 158/1979)rr 6 and 7 (consd)

Leolin Price QC and Michael Kuah (Lee & Lee) for the appellant

Cheong Yuen Hee and Chua Keng Loy (Y H Cheong) for the respondent.

Judgment reserved.

Chao Hick Tin JC

(delivering the judgment of the court):

1 This action concerns an agreement dated 17 February 1981 entered into by the appellants to sell to the respondents certain premises in a building development. The agreement is in a form prescribed under rules made pursuant to powers conferred on the minister by an Act of Parliament. Under the agreement there is a provision for payment of liquidated damages for late completion. There is also a force majeure clause. This appeal raises two main issues and they are the same issues that were raised before the High Court: first, is the liquidated damages clause in the agreement valid and enforceable; and second, whether in the circumstances the appellants can rely on the force majeure clause and thus be excused from having to pay liquidated damages for the delay in completing the transaction.

2 The full facts of the case are set out in the judgment of L P Thean J [see Orchard Twelve Investments Pte Ltd v Golden Bay Realty Pte Ltd [1985-1986] SLR (R) 723. We do not propose to restate them. Suffice it that we sketch out the essentials. In or about 1970 the appellants embarked on the development of a modern multi-storey shopping, office and residential twin-tower building called “Orchard Towers”. On 8 September 1975, the architects certified the practical completion of the building works. On the same day a temporary occupation licence was issued by the relevant authorities for the front block up to the 12th floor thereof, which covered the office premises in question in this action, ie Unit 1205 (“the said unit”). Under the agreement on 17 February 1981 (“the agreement”), the purchase price of the said unit is the sum of $3,380,000. The respondents, having paid all instalments due (75%) in accordance with cl 4 of the agreement, took possession of the said unit on 19 May 1981. In the meantime, even before this purchase by the respondents, the said unit was already rented out by the appellants for a period of three years from 1 November 1978. As from 19 May 1981, the respondents received the rent for the said unit.

3 Under the agreement, the appellants were required to give to the respondents the notice to complete the sale by 31 December 1981 and actual completion should take place within 14 days thereafter. The appellants did not give the requisite notice to complete until 17 June 1983.

4 As the entire action centres round two clauses of the agreement, we will set them out in full:

1. 14 (1) The sale and purchase of the said unit shall be completed at the office of the vendor's solicitors, Messrs Lee & Lee fourteen (14) days after the receipt by the purchaser or his solicitors of the notice to complete from the vendor or the vendor's solicitors such notice to be accompanied by the certificate of the vendor's architect that the temporary occupation licence or certificate of fitness for occupation has been obtained for the said unit, and subject to cl 2 hereof, after receipt by the purchaser or his solicitors of the notice from the vendor's solicitors that the subsidiary strata certificate of title has been...